Dear “Chained-CPI”: When You’ve Lost the VFW, You’ve Lost America

December 12, 2012

Richard Eskow

The “chained CPI” is an attempt to camouflage deep cuts to Social Security and other benefits, along with tax hikes on middle class wages (but not for high incomes), in a forest of numbers and terminology.

Know who’s expert at camouflage? Veterans. And a whole lot of their organizations hate the “chained CPI.”

Sneaky … But Simple

The headline for Derek Thompson’s Atlantic piece calls the “chained CPI” “the sneaky, complicated idea that could end the fiscal cliff showdown.” There’s ongoing chatter that both parties might use it to solve their budget impasse, in large part because they think it’s too complex and wonkish for voters to grasp.

But while it is sneaky, it’s not that complicated. In fact, the “chained CPI” concept can be explained in one sentence: It calculates cost-of-living increases much more slowly than before, by subtracting the cost of the things you can’t afford to buy anymore.

See? I did it in 22 words and 113 characters – short enough to tweet. I’ll bet you understood it even if you hadn’t heard of it before. And not only understood it, but sensed its implications: As a financially-strapped public downgrades from fresh food to canned food … to cat food … their benefits will keep plunging along with their way of life.

And yet hope springs eternal among policymakers. Last year the President even said that “most folks would hardly notice” if this cut to the government’s cost-of-living adjustment was enacted. Guess what: The nation’s veterans noticed.

Standing Up

A wide range of organizations representing the nation’s veterans signed a joint letter to leaders in Congress which said “we are writing to express our opposition to changing the formula used to calculate the annual cost of living adjustment (COLA) because of the harmful effects it will have on veterans and Social Security benefits.”

The organizations signing on to the letter (17 in all) spanned generations, with the Vietnam Veterans of America and Iraq and Afghanistan Veterans of America. It includes former enlisted personnel as well as the Military Officers Association of America. Gold Star Wives, an organization of widows and widowers whose spouses died while on active duty, was represented. And so was the VFW, or Veterans of Foreign Wars, an organization that had traditionally been staunchly conservative.

Here’s a thought for politicians who might be considering the “chained CPI”: When you’ve lost the VFW, you’ve lost America.

Getting It Right

Their letter’s a cogent and very well-written analysis of this proposed benefit cut, which it rightly describes as a “misguided policy.” Here’s a sample:

The average retirement benefit of a veteran receiving Social Security was about $15,500 in 2010 … A veteran with average earnings retiring at age 65 would get nearly a $600 benefit cut at age 75, and a $1,000 cut at age 85. By age 95, when Social Security benefits are probably needed the most, that veteran would face a cut of $1,400 – a reduction of 9.2 percent.

That’s absolutely correct. The chained-CPI would also raises taxes for most Americans, and in a very backhanded way: by forcing people into higher tax brackets much more quickly. Know what wouldn’t get a tax hike under the chained CPI? Income above $250,000.

The veterans’ groups also quote Congressional Budget Office estimates of the chained CPI’s deficit impact: $208 billion over ten years through cuts to Social Security benefits, and through higher taxes – on everybody but the wealthy. (They’d pay a little more, but the tax hikes would strike hardest at those in the $30-$40,000 income range, and would generally affect those earning $100,000 per year of less.)

The veterans note that roughly half this amount, $112 billion, “would come from Social Security cuts, which veterans rely on very heavily for both retirement and disability benefits.”

“Another 11 percent of the savings,” the letter notes, “would come from VA benefits, civilian pensions, and military retirement pay.”

Eldernet

$208 billion also happens to be very close to my estimate of the amount our government will pay pharmaceutical companies for their bloated profit margins over the next ten years. We could probably save $150 billion of that through negotiation and competition among drug providers – but Congress has forced us to pay retail instead.

Think the elderly “won’t notice”? Older Americans’ viral email chains are dazzling to behold. Once you get past all the crazy fonts in different sizes and colors – and the GIF cartoon animations of cute animals and oldsters playing golf – these emails keep them well informed about Social Security and Medicare. And they don’t need emails to tell them that their current cost-of-living adjustments can’t keep up with their expenses.

(That’s why economists have proposed the “CPI-E,” a higher adjustment for the elderly and disabled who rely on items like medical care and transportation, which go up in cost more quickly than most other items.)

Attention Must Be Paid

Let’s get this straight: The “chained CPI” takes money out of the pockets of veterans, the disabled, the elderly and everybody with a job – except the wealthiest of the wealthy. And we could get the money from Big Pharma and other health profiteers instead.

The “chained CPI” is opposed by the young and the old, the left and the right. So who’s the constituency for this thing, anyway?

The polls are clear: Our elected officials were called to Washington for a different mission. Any politician who thinks they can infuriate pretty much the entire electorate because they’ll have billionaire cash on their side just isn’t paying attention.

The good news is that our nation’s veterans have a lot of experience bringing recalcitrant recruits to attention.